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Efficiency in public input provision in two asymmetric jurisdictions with imperfect labour markets

Author

Listed:
  • Gillet, Holger

    (Ministry of Economics, Labour, Energy and Transport of Saarland)

  • Pauser, Johannes

    (Institute for Employment Research (IAB), Nuremberg, Germany)

Abstract

"This paper examines efficiency in public input provision in two large jurisdictions with imperfect labour markets. It analyses how equilibrium capital tax rates and public input provision levels differ between asymmetric jurisdictions that can strategically influence the interest rate on the common capital market in an international tax competition setting. In contrast to the scenario assuming competitive labour markets, the non-cooperative equilibrium is inefficient also when governments have capital and head taxes at disposal. As a source of both the distortion in the capital allocation between jurisdictions and the inefficiency in public input provision, which can be determined in at least one of the jurisdictions, we identify the governments' incentives to decrease unemployment, and a pecuniary externality [De- Pater, J., Myers, G., 1994. Strategic capital tax competition: a pecuniary externality and a corrective device. Journal of Urban Economics 36, 66-78.] in both jurisdictions. Efficiency in public input provision can be restored, however, if the set of fiscal instruments available for regional policy makers is extended by a labour tax." (Author's abstract, IAB-Doku) ((en))

Suggested Citation

  • Gillet, Holger & Pauser, Johannes, 2014. "Efficiency in public input provision in two asymmetric jurisdictions with imperfect labour markets," IAB-Discussion Paper 201411, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    • Handle: RePEc:iab:iabdpa:201411
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    References listed on IDEAS

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    Cited by:

    1. Stephan, Gesine & Uthmann, Sven, 2014. "Akzeptanz von Vergeltungsmaßnahmen am Arbeitsplatz : Befunde aus einer quasi-experimentellen Untersuchung," IAB-Discussion Paper 201427, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].

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    More about this item

    Keywords

    Besteuerung ; Finanzpolitik ; Gebietskörperschaften ; Kapitalmarkt ; Kapitalmobilität ; Allokation ; Marktunvollkommenheit ; öffentliches Gut ; Region ; Arbeitsmarkt ; Wettbewerbsbedingungen;
    All these keywords.

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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